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Kitimat LNG Dials Up Canada Gas to Asia -- Again

Calgary-based Kitimat LNG Inc. said it has entered into a more than C$20 billion agreement with Korea Gas Corp. (KOGAS), under which KOGAS will acquire up to 40% of Kitimat LNG's production and an option to acquire an equity stake in Kitimat LNG's liquefied natural gas (LNG) export terminal in Bish Cove, BC.

KOGAS, which bills itself as the world's largest LNG importer, plans to purchase two million tons per annum (mtpa) of LNG from the proposed terminal for 20 years. The total purchase value would be more than C$20 billion over 20 years of operation, the companies said.

"We welcome KOGAS's participation in our project," said Rosemary Boulton, president of Kitimat LNG. "The addition of a strong international company and leading LNG buyer such as KOGAS marks a significant milestone in the development of the Kitimat LNG terminal."

KOGAS CEO Kangsoo Choo said the deal marks its first for Canadian gas. "Our agreement with Kitimat LNG is key to our ongoing efforts to ensure a secure supply of natural gas for Korea in the long term," he said.

Kitimat LNG said it is progressing with discussions with other potential terminal users and investors for terminal capacity, off take from the terminal and equity in the 5 mtpa project. Monday's deal was not Kitimat LNG's first to bring Canadian gas to the Pacific Rim markets. In January Japan's Mitsubishi Corp. agreed to acquire 1.5 mtpa of terminal capacity and acquire a minority equity interest in the terminal.

"KOGAS's involvement reinforces that our project is supported by strong business fundamentals and trends in the global and Western Canadian natural gas markets," added Boulton.

Last September Kitimat cited shifting global gas supply and demand fundamentals as reason to revise its plans for a LNG import terminal in favor of an export terminal at Bish Cove (see NGI, Sept. 29, 2008). Rising gas demand in Asia and recent increases in supply in North America -- including in the U.S., Canada's traditional export market -- have led to significantly higher natural gas prices in Asia in North America.

KOGAS, which was incorporated by the Korean government in 1983, operates three LNG terminals and currently imports 26 million tons of LNG per year into Korea.

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